Regulatory Bulletins

Bulletin 10 – IPO List Regulatory and Operational Compliance Considerations

Elimination of the Inpatient-Only List

Regulatory and Operational Compliance Considerations



The CY 2021 Medicare Hospital Outpatient Prospective Payment System (OPPS) Final Rule[1] included the Inpatient Only (IPO) List phase-out over 3 years. Over the past decade, the Centers for Medicare & Medicaid Services (CMS) has repeatedly put forth policies that reinforce the stance that deference is to be given to the physician’s clinical knowledge and judgment to determine the most appropriate setting, inpatient or outpatient, for a patient to receive services. This Final Rule is consistent with the approach that CMS has regularly communicated and demonstrated that the physician, with his or her clinical knowledge, expertise, and unique relationship with the patient, is the one who is best suited to determine the appropriate setting to provide care. The 3-year phase-out of the IPO List will have a significant impact and requires a thoughtful approach to manage from a compliance perspective.

I. What You Need to Know About the Elimination of the IPO List:

  • By the end of 2020, there were approximately 1,740 services on the IPO List, which CMS reviewed annually and either removed or added services depending on established criteria.
  • CMS, in the CY 2021 OPPS Final Rule, proposed a phased transition of all services from the IPO List over a 3-year period, with complete elimination targeted by 2024.
  • Beginning on January 1, 2021, nearly 300 procedures were removed from the IPO List.
  • Newly removed procedures may not yet have Ambulatory Surgical Center (ASC) billing codes, and therefore should still be provided in a hospital setting as either inpatient or outpatient.
  • CMS gives deference to the treating physician using “[H]is or her clinical knowledge and judgment, together with consideration of the beneficiary’s specific needs, to determine whether a procedure can be performed appropriately in a hospital outpatient setting or whether inpatient care is required.”[2]
  • CMS has also reminded providers that despite the interim exemption from audit activity for procedures removed from the IPO List, providers are still expected to comply with the 2-Midnight Rule.
  • Once removed from the IPO List, procedures will be indefinitely exempted from site-of-service claim denials for non-compliance with the 2-Midnight Rule. The Beneficiary and Family Centered Care-Quality Improvement Organizations (BFCC-QIOs) will still be reviewing claims for exempt procedures, but only to provide education regarding compliance with the 2-Midnight Rule. CMS has confirmed that the exemption will end when Medicare claims data evidences the procedure is performed successfully more than 50% of the time in an outpatient setting.


II. The Compliant Approach:

The Versalus approach as always will include client education regarding the changes as well as implementing a review process that is no more restrictive than CMS guidance to its contractors. 

In the OPPS 2021 Final Rule: 42 CFR Parts 410, 411, 412, 414, 416, 419, 482, 485, 512, [CMS-1736-FC, 1736-IFC], CMS communicated: 

“Medical Review of Certain Inpatient Hospital Admissions under Medicare Part A for CY 2021 and Subsequent Years (2-Midnight Rule): For CY 2021, we are finalizing a policy to exempt procedures that are removed from the inpatient only (IPO) list under the OPPS beginning on January 1, 2021 from site-of-service claim denials, Beneficiary and Family-Centered Care Quality Improvement Organization (BFCC-QIO) referrals to Recovery Audit Contractor (RAC) for persistent noncompliance with the 2-midnight rule, and RAC reviews for “patient status” (that is, site-of-service) until such procedures are more commonly billed in the outpatient setting.”[3]  [Bold added by author]

“We continue to believe that deference should be given to physicians and medical professionals in these determinations. In accordance with section 1801 of the Act, CMS does not control or supervise the practice of medicine or the manner in which medical services are provided.”[4] [Bold added by author]

III. Effective Compliance Considerations:

All health care providers are required to develop and maintain an effective compliance program that encompasses the key elements of standardization, program administration, screening, communication and education, monitoring, investigation, and discipline. Establishing the measurements for these elements, however, is likely to require a unique and tailored approach for your organization.

Providers may wish to consider the methodologies referenced by the Office of Inspector General for the United States Department of Health and Human Services (HHS OIG) and established during the 2017 HCCA-OIG compliance roundtable: Measuring Compliance Program Effectiveness: A Resource Guide to determine the most effective measurements for your organization.

Providers should consider tailoring the following elements further:

  • Standards, Policies & Procedures

Establish clear procedures that speak to the change.

  • Policies, Procedures, Standards should include:
    • Guidance regarding the applicability of the 2-Midnight Rule as the standard by which all inpatient admission cases should be reviewed;
    • Review of admission order policies for accuracy;
    • Guidance on how the initial admission status order (inpatient vs. outpatient) should be formally documented as part of the pre-procedure evaluation documentation and accompanied by a documented reasonable expectation of the need for at least 2 midnights of medically necessary hospital services and clinical rationale supporting this expectation.
  • Additional guidance for treating physicians to review and/or update post-procedure plan of care, admission status, and documented CPT code which may require adjustment from the pre-procedure plan, admission status, and CPT code.


  • Communication & Education

Notify staff of the significance of the IPO List change and establish a training plan.

  • Rollout general and role-specific education for executive, fiduciary and compliance leadership, treating physicians, physician advisors, and operational teams. Subjects may include:
    • Regulatory guidance;
    • Utilization review processes and responsibilities;
    • Outcome analyses, reporting, audit, and monitoring processes;
    • Tactical interventions to address variances in performance from established benchmarks.


  • Monitor & Audit

Review and assess adherence to new standards, policies, and procedures to ensure staff compliance.

  • Develop an “IPO List elimination” plan, against which targeted performance may be assessed.
  • Establish and review your ‘Reporting Systems’ containing data analytics relevant to the IPO List phase out.
  • Analyze hospital performance for IPO List phased out procedures.
  • Identify physicians with high error rates for IPO List phased out procedures.
  • Assess CMS guidance to determine rebilling requirements.


The elements not addressed above (program administration, staff screening, discipline, and investigation) should not be overlooked. Versalus Health recommends that providers apply their established approaches to these key factors.

Ultimately, managing both the revenue and compliance impacts of the elimination of the IPO List requires the creation of an ongoing, dynamic, and actionable performance plan based upon the evolving thresholds of length of stay and effective clinician education.


[1] CMS-1736-FC

[2] 85 FR 86084. CMS-1736-FC. Retrieved from: Accessed 13 Jan 2021.

 [3] 85 FR 85869

[4] 85 FR 86087

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